Thanks to the world wide web, starting a business is now relatively easy to do, compared to bygone days. Starting a business brings with it the promise of freedom from a boss and limitless wealth. At least that’s what most entrepreneurs have in mind when they’re dreaming of making it big.
While it is definitely not wrong to dream (afterall, all successful businesses were the daydream of someone at some time), discovering the realities of business can give you that extra edge when you take that leap of faith and launch your company.
So here are six facts about starting up that all new business owners should know:
New businesses are a dime a dozen
You might have come across the statistic that says there are 3 new businesses formed every second worldwide. In reality, this only means that wanting to strike it out on your own is not a strange thing. Although a lot of people prefer the relative stability of having a job, very many people still want to be their own bosses, and why not?
Of course, the statistics are not the same for every country. Understandably, the United States registers the highest number of new businesses every year with the figures from 2017 showing 4.8 million start-ups. However, when compared on a percentage basis, third and second world countries seem to be doing the most. Countries like Uganda, Cameroon and Vietnam are top of the percentage standing worldwide.
In the UK, the number of registered startups in 2017 stood at over 800,000. So, just having a new business does not make you unique. It’s the quality of the startup that does that. So, while you may have many brothers or sisters-in-arms as an entrepreneur, how well you are all doing is a different ball game entirely.
Most startups are one-person businesses, and most are duplications of businesses that already exist. That means a significant number of plumbers, electricians, dropshippers and freelancers. Many new businesses, but very few innovations.
They fail… an awful lot
Starting a new business may look like plain sailing but from the evidence so far, the waters are murkier than they look. One of the most popular studies on startups by the CBI states that an alarming 90% of them fail. The true figures however are not quite as startling and are heavily dependent on your location and other factors.
Still, those figures are shockingly high. Another source puts the figure at 75% which is still a lot higher than most people would like to see. It appears that starting a business puts you at a higher risk of failure than it guarantees the promise of success. In fact, a huge number of new businesses do not operate at a profit for at least the first year of their business. Most owners have to derive satisfaction from being their own bosses rather than profit.
The reasons for failure differ fundamentally from business to business but there are a few very common ones. Top of the list is that whatever product the start-up was launching was not needed by the market. The second most common reason had to do with cash flow. A lot of startups are self-funded by the owners. However, if not smartly managed, they could be run over by the same owners.
Most new business owners do not stay on as CEO
If your reason for starting your business was to be able to brag about being your own CEO, you might have to check again. The statistics show that you are more likely to be removed (or step down honourably) as the CEO of the company you founded if it is successful. For confirmation, look at Bill Gates, Sandy Lerner, George Zimmer, Steve Jobs and Harvey Weinstein. The list on this one is endless.
Although this may come as a shock to most people it is actually perfectly logical. A founder is very different from a manager and that is what a CEO is. So, unless a business owner can successfully transition from being founder to manager, they will have a lot of issues running it. Scandals are one of the most common reasons for CEOs to leave their companies.
Company politics comes into play here a lot too. Contrary to popular opinion, successful business owners have bosses, lots of them – boards of directors and investors. Keeping them happy is essential for your businesses’ success.
They are more likely to succeed if more than one person is involved
Remember how most new businesses are one-man setups? Turns out that may be one of the reasons they are unsuccessful. Having more than one person in a business gives it a greatly improved chance of success for a couple of reasons:
- Balance: Different people bring different skills to the table. In the right setup, this can even out to create a nice balance.
- Division of Labour: more people working simply means you can get more work done.
- More money: since most startups are self-funded, having someone to fund it with you is a big advantage.
If they are growing slowly, there is a higher chance they will die
We’ve all been told persistence is required to be successful in business. Well, it’s true. The only caveat is that if you have been persistent for a long time without significant success, you are most definitely doing something wrong. It turns out that if your company is not growing fast enough, you have serious problems. Some of which are losing customers, personnel and even passion. In this age, the goal should be to build your business and build it fast!
To succeed, they need to be adaptable
If you find that your business is not growing as fast as you want or the market is not responding to your product, persistence may not be the smartest move. Although you can and should continue to believe in your dream, it sometimes becomes necessary to tweak it. To be successful, you will have to constantly change your product or business model to adapt to the market’s needs. Every successful company learns at some point that standing still is the same as becoming stagnant.
Starting a business is like having a baby. It is time-demanding, energy draining and very, very precious to you. Similarly, getting the best advice on how to grow it will be crucial in making it a success. There is only so much you can know or do by yourself. Studying deep beneath the surface will be essential to your success. But if the top 1% could do it, surely you can!